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2023 Global Trends In Personal Income Tax

Equus’ in-house tax team completed another “busy season” to deliver 2023 changes to the Equus Tax Engine, which calculates tax costs in AssignmentPro. These tax costs are generated by the Cost Estimate and Compensation Calculation modules to project assignment costs and deliver balance sheets. Changes impacting over 30 countries were delivered in two releases, before and after the January 1 effective date, for countries with calendar tax periods.

Our team relies on a tried and tested monitoring process to identify these changes. The process comprises both timely tax news reviews and proactive searches for anticipated updates.

After making these changes in countries across Asia, Africa, America, and Europe, here are some trends we observed in personal income tax:

Inflation Adjustments

Over half of the updated countries adjusted for inflation. Some countries like Canada and the United States “baked” CPI-based adjustments into their tax laws to increase tax brackets and deductions annually. Others, such as France and Ireland, need legislators to enact Finance Law as part of their annual budgeting process.

With global inflation higher than previously seen for several decades, it is unsurprising that some lawmakers took steps to avoid bracket-creep, where individuals with earning increases due to inflation are pushed into higher tax brackets, resulting in higher tax liability.

Lower-To Middle-Income Tax Reliefs

Lawmakers in some countries passed legislation to ease cost-of-living pressure for constituents in the low and middle tax brackets who are most impacted. In Portugal and Philippines, the tax rates at lower brackets were reduced. In South Korea, the thresholds for the lower tax brackets were lifted, keeping more taxpayers at a lower marginal rate.

Increased Top Rate

Adding or increasing top brackets provides greater progressivity where higher income earners pay progressively higher tax. Higher top brackets can increase governments’ revenue, which helps fund programs. Singapore added modest 23% and 24% brackets for income above SGD 500,000 and SGD 1,000,000. Slovenia resurrected the top rate of 50%, after decreasing it in 2020 to 45%.

Slovenia re-joins Austria, Belgium, and Israel in an exclusive group of four OECD countries  with a top marginal rate at 50%. Slovenia’s 50% rate applies to income above EUR 74,000. Belgium’s threshold is the lowest at EUR 46,440. Austria and Israel are at about EUR 93,000 and 185,000, respectively.

Government Balancing Act

Governments must manage a balancing act to alleviate taxpayers’ burden due to inflation or to raise sufficient revenue to replenish coffers after the pandemic to fund public programs. No matter how governments respond to macro-economic events, our team has a reliable process to update the Equus Tax Engine, delivering up-to-date, accurate tax calculations for your assignment projections and balance sheets.

Contact us to find out more.

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